Why Scan the Environment?

Environmental scanning is important to a company for a number of reasons

To identify threats spinning from the environment. A threat could be: A new competitor in a firms market. Price wars with competitors A competitor has a new, innovative product or service. Taxation introduced or increased on a firms product or service. Identify opportunities spinning from the environment and exploiting it to the firms advantage. Opportunities could be: A developing market such as the internet. Mergers, joint ventures or strategic alliances. A new international market A market vacated by an ineffective competitor. To identify the firms weaknesses. These are the lack of or inaccuracy of the firms resources that should be converted into strengths. A weakness could be: Lack of marketing expertise Poor quality goods and services Undifferentiated products and services To identify the firms strengths. These are capabilities (bundles of assets and skills) that can be used to exploit opportunities, combat threats and overcome weaknesses. A strength could be: Your specialist marketing expertise Quality products New innovative products or services. To develop strategies that can enable a company to cope with the ever changing environment.

Processing of Business Environment Analysis 1. Scanning to detect change. The entrepreneur identifies key elements and their characteristics. The goal of scanning is to detect change and give a new venture time to adapt to the changes. Entrepreneur scans several sources of data i.e. journals, newspapers, electronic, internet, news, books, Wall Street adverts, magazines, special reports and documentary. 2. Monitoring. The process of taking the evolution development and sequence of critical events that affect the survival and profitability of new business.

Data from the scanning process are inputs to the monitoring process. Specific trends and events are monitored to confirm predictions about how they affect the firm. The outcome of the monitoring process is a detailed model of how various elements influence the firm. 3. Forecasting. Forecasting to develop projections into the future. They can be projections of elements like level of prices, direction of interest rates, future scenarios of cause and effect e.g. how money supply causes inflation. 4. Assessing. Its the most difficult task. To answer the critical question What does the information imply? ANALYZING INTERNAL ENVIRONMENT Internal analysis begins with identification of organizational resource allocation in terms of strengths and weaknesses. Areas covered by environmental analysis. Financial position. Product/service position. Marketing capability. R & D capability. Organizational culture. Human resources Facilities and equipment. Past and current objectives and strategies. At the end of the internal analysis the management should determine how strengths compare with accepted standards of excellence, whether strengths can be imitated and a comparison with the competitors. At the end of the analysis establish; Distinctive competencies. Competitive advantage. Business requirements. Key vulnerability. Tools for analyzing the internal business environment; Resource based view (RBV) Value chain analysis. The balanced score card.